The CNBC report was fairly neutral, though the headline says, "Inflation Stays Tame." If we trust my early morning math, I calculated that from Dec 2008 through Dec 2009:

* Actual CPI rose 2.7%, and

* "Core" CPI (less food and energy) rose 1.8%.


These are not "liquidity trap" numbers (though technically Krugman et al. could say they are consistent with an optimal interest rate that is constrained by the lower bound of 0%). The Fed's ostensible target for core inflation is 1.5% - 2.0%. So the inflation the BLS says we just had in 2009, is exactly in the sweet spot according to the Fed's desires.

In other words, it's not as if we are still experiencing very low "price pressures." You could try to be very fair to the financial press and interpret them to be saying, "Wow, it's amazing how tame inflation is, given the extraordinary Fed interventions."

But I don't think that's how they're framing it, especially in cases like this.

I'll be watching the money supply figures closely to see if the banks begin moving out the excess reserves. I think as bond yields begin rising (and they already have), it will be less and less attractive for banks to keep their excess reserves parked at the Fed.